The Lure of the South

Cheaper land and increasing yields attract attention of Midwest producers and global investors

A small but growing number of Midwest producers and global investors see gold in southern farmland for growing corn.

"It’s a 4 to 1 trade," says Ted Glaub, a Jonesboro, Ark., real estate broker and land manager who specializes in Delta farmland. "By selling one acre in Illinois, producers can get four in the Mississippi Delta."

"By selling one acre in Illinois, producers can get four in the Mississippi Delta."

Northerners aren’t just buying land in the South; many are renting land, says Gar Lile, an Arkansas farm real estate broker and farmland manager. You can get land rents in the Delta for $150 to $200 per acre, Lile says.

Another benefit of the South is larger farms, which is a lure for farmers and especially investment funds that look for larger holdings than the Midwest typically offers.

Thanks to new hybrids and improved production practices, yields are also attractive—similar to Corn Belt standards. According to USDA, the average five-year yield for Iowa is 165.8 bu. per acre, Georgia is 161, Arkansas is 160.2 and Illinois is 154.2. This year, Georgia leads this pack of four at 183 bu. per acre, Arkansas at 182, Illinois at 180 and Iowa at 169.

Average land values in the South are cheap compared with the Corn Belt: $3,000 per acre in Arkansas, $3,600 in Georgia, $7,800 in Illinois and $8,400 in Iowa, according to USDA’s 2013 land value study.

It’s not just land values that are attractive, but growth rate. For the past five years ending in 2012, the annual growth rate of land values was 15.74% in Iowa, 10.76% in Illinois, but only 4.93% in Arkansas. Land values in Georgia declined 4.6% due to the housing crash.

Additionally, the Delta offers 4% returns versus 3% in the Corn Belt. The 2011/13 average corn basis for La Porte, Ind., was a positive 40¢, but in south central Georgia, it was a positive $1 per bushel, says Howard Halderman, president of Halderman Real Estate Services in Wabash, Ind.

Land Grab. But farmers aren’t leading the land grab charge. Halderman and other farmland real estate brokers and farm managers say investment funds and Argentine
producers are leading the charge.

The Delta is an interesting twist from the Midwest, where farmers comprise the vast majority of
farmland purchases.

In the Delta and the Southeast, it’s just the opposite. Eighty percent of farmland is being purchased by nonfarm investors and hedge funds, Halderman says.